Welcome Guidance On Pension Plan Fees & Expenses

by Dentons
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The subject of what can and can’t be charged to a pension plan has always been an important one for employers because of the often high costs related to administering a pension plan.

On January 23, 2013, the Ontario pension regulator (the Financial Services Commission of Ontario), issued a new policy regarding administrative fees and expenses payable from a pension fund. The new policy, Policy A200-101, replaces four existing policies on the topic and is accessible at http://www.fsco.gov.on.ca/en/pensions/policies/active/Documents/A200-101.pdf.

Although clarification regarding expenses chargeable to pension funds was provided in late 2010 with the addition of a new section 22.1 in the Ontario Pension Benefits Act (“PBA”), Policy A200-101 provides additional guidance that is welcome.

Policy A200-101 reiterates that fees and expenses payable from a pension fund must:

  1. be reasonable;
  2. relate to the administration of the pension plan or the administration and investment of the pension fund; and
  3. not be prohibited or otherwise provided for under the documents that create and support the plan or the fund, or under the PBA or related regulations.

It is the plan administrator’s responsibility to determine whether or not an expense fits the criteria to be properly charged to a pension fund. So it is up to the plan administrator to decide whether amounts are appropriate and reasonable, and to find out whether there are provisions in the pension plan documentation that restrict the charging of expenses.

Since each pension plan is unique, the PBA and regulations do not set out the specific nature or type of administrative expenses that can be paid from a pension fund. However, Policy A200-101 provides examples of the types of expenses that would usually be considered appropriate administrative expenses, such as certain actuarial fees, trustee and custodial fees, and investment management fees. It also provides examples of expenses incurred that would not usually be properly chargeable to a pension fund. These typically include fees incurred by a person acting in the role of plan sponsor, collective bargaining agent or employer.

Many types of fees and expenses incurred by a plan sponsor or administrator can be complex and difficult to categorize. FMC can help you identify proper fees and expenses that can be charged to your pension fund. Please feel free to contact one of our Pension & Benefit experts and we would be pleased to assist.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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